JP: PMI Composite

Wed Dec 02 19:35:00 CST 2015

Actual Previous
Composite - Level 52.3 52.3
Services - Level 51.6 52.2

The seasonally adjusted services index reading was 51.6, down from 52.2 in October, signaling a slowdown in output growth at Japanese services firms. However, the latest reading was broadly in line with the average over the current eight-month sequence of expansion. New project start-ups and increased new orders were both cited as factors supporting growth. Contributing to the expansion in service sector activity was a rise in total new business in November. However, the rate of increase eased and was weaker than the average seen over the current eight-month sequence of growth.

In contrast, the manufacturing PMI increased at the sharpest pace since March 2014. The quicker increase in manufacturing output was reflected in the composite index. The reading was 52.3, unchanged from October.

Latest survey data pointed to a slowdown in the rate of improvement in business conditions at Japanese services firms. Both activity and new business growth eased to only modest rates. Moreover, employment contracted during the month. Meanwhile, inflationary pressures eased, as input prices increased at the slowest rate since February. Similarly, charges rose at a weaker rate. Despite subdued demand conditions and dampened activity growth, service providers remained positive towards the 12-month outlook, with business sentiment picking up from October's five-month low.

Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the 'Report' shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the 'diffusion' index. This index is the sum of the positive responses plus a half of those responding 'the same'.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.